Cloud Partnerships: It's Complicated

Oracle is making nice with Microsoft and Salesforce.com is doing deals with bitter rivals. Here's why coopetition rules in the cloud age.

Many were shocked when Oracle and Microsoft announced in June that Oracle technologies and applications would soon be running on Microsoft's Azure Cloud. And some cloud purists where aghast when Salesforce.com struck a strategic, long-term partnership with Oracle to use its database and middleware and to integrate with its cloud-based HCM and financials apps.

The years of trash talk would seem to indicate that these are blood rivals. Oracle CEO Larry Ellison not so long ago described Salesforce.com and its Heroku development platform as a proprietary "roach motel: you can take your apps in, but you can't take them out." Meanwhile, Salesforce.com CEO Marc Benioff was showing slides of Exadata branded as a "false cloud" with a big, red circle-slash pasted over it. Microsoft and Oracle, too, have seen years of database battles, yet now we'll see Oracle Database as a service running on Azure!

Our collective sense of irony (not to mention deja vu) was stoked yet again this week when Salesforce.com deepened an existing partnership with Workday, a company that has been snatching up PeopleSoft customers from Oracle -- Salesforce.com's other strategic partner -- at every opportunity.

What's sparking these seemingly contradictory alliances is the cloud-computing-era's rapid deployment expectations. The consistent explanation we hear for partnership is integration and interoperability for the sake of the customer.

"In our customer implementations the number-two line item after the business process design is the cost of integration, so if we can strip that out by having prepackaged integrations, that's great for customers," said Workday CEO Aneel Bhusri during a joint conference call with Benioff on Wednesday.

Data warehousing vendor Teradata had much the same explanation for deepening its partnership with Revolution Analytics and starting a new partnership with Fuzzy Logix this week -- this despite the fact that Teradata has a longstanding relationship with Revolution and Fuzzy competitor SAS. Customers are demanding more options, said Teradata executives, and they want all those options to work seamlessly on their Teradata platform.

"The coopetition factor has gone up, and it has gone beyond certified integrations," said Rob Berman, VP of global alliances at Teradata, told InformationWeek. "Today, that's table stakes and partners have to operationalize those integrations and provide supporting expertise."

Teradata's technologies are mostly deployed on-premises, so "operationalize" basically means not just supplying code, but also getting it up and running in a fast, cloud-computing-like time frame. As for the overlapping partnerships, Berman said it has become routine for vendors to work with the tech-industry equivalents of Hatfield and McCoy -- or SAS and Revolution in this case.

"We compete against vendors that are trying to build their own best-of-breed stacks, but we find that there's no one technology or platform that really suits the needs of all our customers," Berman said. "Between the virtualization of the data warehouse and adding big data into the equation, we've had to create an ecosystem."

The rapid emergence of new technologies has changed the rules of partnership, according to Scott VanValkenburgh, senior director of alliances at SAS. In the past, for example, SAS might have taken a "wait and see" approach to a new technology like Hadoop, "but customer demand is such that you have to start working with small [Hadoop] startup vendors that may not be well capitalized and that might not have great reach to figure out how to play well together and integrate," VanValkenburgh said.

New players like Amazon and the cloud movement in general is changing the way software is delivered and sold, VanValkenburgh acknowledged. That's led SAS to provide analytics as a service with partner Deloitte in the U.K. and various managed application services here in the U.S.

Instead of seeing overlapping or seemingly contradictory alliances as a slight or "snub," as my headline characterized the Teradata-Revolution deal, VanValkenburgh says partners have to accept that even the closest partners must do business with other companies.

"IBM is one of our biggest partners, but it's also one of our biggest competitors," he points out. "You have to have a balance and maturity to deal with the coopetition, firewall the partnership and focus on what it's possible to do together."

What's sparking these 'seemingly contradictory alliances'? One word. Licensing. 95% of the cloud infrastructure or Virtual Data Centre providers I've spoken to fumble and stumble as soon as you mention Oracle, simply because of the licensing model.

Done right, "the cloud" isn't a competitor in database or applications. It's a hunk of remote hardware, available to anybody who wants to use it. Excluding yourself from that hardware due to competitive labels means missing some potential customers who want to use it.

There's no doubt Google has made headway into businesses: Just 28 percent discourage or ban use of its productivity ­products, and 69 percent cite Google Apps' good or excellent ­mobility. But progress could still stall: 59 percent of nonusers ­distrust the security of Google's cloud. Its data privacy is an open question, and 37 percent worry about integration.